If you want higher returns, you must accept a higher probability of large losses or other unforeseen risks. And, if you want to dampen large losses, you must accept the prospect of lower returns. There is no stronger relationship in all of investing than risk and reward. And the whole point of asset allocation is calibrating your personal risk profile with your portfolio holdings.
Provide Better Advice
You’ll never buy at the exact bottom. That’s not how these things work. You’ll either be early or late but trying to pick when that bottom will come is a fool’s errand. Perfect is the enemy of good when putting money to work during a sell-off.
Will you invest at the absolute bottom? Not unless you’re ridiculously lucky. But the point remains that the bigger the losses, the higher the expected returns. This feels like an awful time to buy stocks. That’s usually a good sign.
Buy low, sell high. Even if you know nothing about investing, you’ve heard this phrase before. With the S&P 500<sup>®</sup> Index off its highs, investors have an opportunity to execute on the first half of that statement. As stocks decline, they become more dangerous in the short-run but more attractive over the long-run.
Every bear market in the history of U.S. stocks has led to new all-time highs at some point in the future. Is it possible this time is different? Sure, anything is possible. I choose to believe things will be better in the future.
The stock market is in the midst of a correction. Things look bleak and could certainly get worse. But, the stock market will recover eventually. I’m far more worried about the bond market right now than the stock market.
When stocks go down in a big way, it’s more helpful to seek out the right questions as opposed to trying to find all of the answers. There are no right or wrong answers here because it all depends on your circumstances.
A decline early in your retirement can have a big impact on the value of your nest egg. You’d have to draw down a larger portion of your portfolio to meet your income needs, while a decline that occurs later might be less hazardous to your wealth.
Recent financial innovations have created both a wealth of opportunity and an avalanche of complexity for investors. It has never been easier—or more overwhelming—to take investment risk. With complexity comes the need for simplification. How do investors cut through the noise and take control of their portfolios? This guide offers perspective on the so-called active and passive investing debate, with an eye toward prioritizing diversification, risk management, and investor behavior.
There are four steps to calculating your "retirement number" - the number of dollars you most probably need as a sum of capital from which to draw a lifestyle-sustaining income without serious danger of running through the capital.